An Investigation of Practical Matters Related to Implementing Fair Value Accounting for Property/Casualty Loss Reserves

The Casualty Actuarial Society (CAS) engaged PricewaterhouseCoopers LLP (PwC) to identify and consider the actuarial issues property/casualty insurance companies may encounter by presenting financial results under a fair value accounting standard. The foundation of International Accounting Standards Board (IASB) proposals is that insurance assets and liabilities should be shown in the financial statements at ‘fair values’ (i.e. market values where a market exists), which differs from current U.S. generally accepted accounting principles (GAAP). This study focuses strictly on the impact fair value accounting could have on loss and loss adjustment expense reserve levels for three specified lines of property/casualty business. We have not considered the impact fair value accounting may have on unexpired risk reserves, any other liabilities, or any assets.